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Does The Buyer Matter When Selling A Manufacturing Company?

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Comments & Replies: 5     Views: 1923     Posted By: Timothy Cunha JD  Timothy Cunha JD: Business Broker, SF Bay Area



Topics: Buying A Business, Selling A Business     Tags: buying a business, selling a business



I hear the comment, "As long as they have the money that’s good enough for me” on occasion; but when it comes to a manufacturing company, it can make a big difference finding the right buyer is critical. Is the manufacturing company best suited to an absentee investor or a hands-on entrepreneur manager? An expert in this industry sector or a neophyte? An existing competitor or someone new to the industry?

Here is my opinion on this matter:

Who the buyer is can affect the negotiation process. The buyer could be an employee, a relative, an individual or corporate investor, a platform company rolling up synergistic operations, a competitor. For each of these a different approach is needed. Again, the experienced business broker can manage the process most effectively.

What experience have other brokers had identifying the right buyer for a manufacturing company? Would like to know your experiences regarding if the buyer truly does make a difference when buying a manufacturing company, please comment above.


From a business purchase financing perspective an owner (or the broker representative) of a manufacturing company being offered for sale should get their business "pre-approved" for acquisition financing to confirm that their asking price and deal structure they are offering can be financed - and what types of financing would be available so that potential buyers are not wasting their time. Also a professional pre-approval should give a profile of a potential buyers that would be approved for acquisition financing for a manufacturing company purchase.


Tim poses a great question that applies to all business purchases.

As an attorney who has started, bought and sold businesses personally as well guiding clients in the process I can tell you from my own experience that finding the "right" buyer is always critical - though the issues may be magnified in a small manufacturing business which can often rely on an owner's expert knowledge for success.

Whether you're providing seller financing and want to ensure that the buyer will make their monthly payments or if you're doing an all cash deal and simply want to reduce the likelihood that your buyer will sue you in the future it's key to make sure the buyer is the right fit for your business.

In manufacturing, or any other industry where owner expertise can be a factor in the business operations, it's important to both find someone who either has or can quickly learn the skills needed and to disclose the extent to which the seller has special skills and experience that are required to run the business successfully.

Note: Every business and transaction is different. This information is provided for general purposes only and should not be taken as or used as legal advice. If you are conducting a business transaction consult with your own legal counsel for advice specific to your business.


Mark makes some really valuable points. And, as an attorney myself (licensed in New Jersey, not California), I can't emphasize enough how important it is for buyers and sellers to retain an attorney with specific expertise in business transactions to represent them in the transfer of a business. Just like doctors, lawyers have specialties--you wouldn't consult a urologist to perform your heart surgery; the same logic applies to lawyers. A lawyer like Mark Chatow not only understands the legal aspects of the buy-sell transaction, but also comprehends and appreciates all the business-related nuances that can spell the difference between the transaction succeeding and failing.


Certain industries such as food and hospitality, the buyer can be brought up to speed through training on how to run the business, but there are other niche markets, such as those that specific manufacturing fields fulfill where it would be more difficult for the new owner who has no experience to step into. Many manufacturing companies the owner should have a competent level of expertise because they are the driving force of the company. In such a litigious state such as California, it's important for a business broker and seller to find the right buyer for a business especially if the business requires a high level of expertise, because if the buyer fails and was ill equipped to purchase the business then there is a high chance that they may seek damages from parties involved.


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Elizabeth McGovern: Escrow Services - SF Bay Area

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Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

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